Just DAO It: A Podcast for People Starting DAOs | Transcript: Just DAO It! DAO News & Interview with Graham from Mezzanine

Just DAO It! DAO News & Interview with Graham from Mezzanine

June 10, 2024 / 01:30:04/E60

Hello, everybody,

and welcome to Just DAOIT,

the podcast for people starting DAOs.

I'm Adam Miller, and I'm your host.

As always, we are streaming live,

and then we will push this

to our podcast feed later.

So apologies in advance for

any technical difficulties.

As always,

the first half of the show will

be the Just DAOIT news report.

followed by an in-depth

interview with Graham Novak,

who I'm really excited to

have on the show.

In the first half of the

Just DAO News Report,

I will be summarizing

recent DAO news stories,

and Graham and I will be

commenting on those stories,

giving our hot takes if we

agree or disagree with the

author or what we think

these articles mean for

people starting DAOs.

But first,

I would love to just do a brief intro.

Graham, welcome to the show.

Tell us a little bit about yourself,

and in particular,

what makes you an authority on DAOs?

Hey Adam, thanks for having me.

Excited to join you for this.

I am the CEO and founder of

a company called Bezzanine Labs,

and we build software for

on-chain organizations.

It's an application library

for organizations to kind

of mix and match,

build their own organizations.

I guess you could call me an

authority in crypto or on DAOs.

In 2021,

I started an organization a lot of

people participated in

called Constitution DAO.

We raised over $40 million

in a few short days to try

to buy an original copy of

the Constitution.

And the whole project was

literally one week from idea to auction.

And we ultimately ended up

losing to Ken Griffin.

Yeah, it's an awesome story.

If anyone's not familiar

with the Constitution DAO story,

maybe we'll talk a little

bit more about it later,

but you can also Google it

and there's lots of good media coverage.

That's awesome.

Well, let's dive into the news report.

And then as promised, after the news,

we'll go into a more

in-depth interview with Graham,

as we always do with our guests.

So for the Just DAO News Report, again,

I will summarize each of

these stories for the

audience and for you, Graham,

and we'll dive into some

commentary on each one.

Sound like a plan?

Sounds good.

All right,

so we haven't done an episode in

a couple months,

so we may have a couple

stories that are several weeks old,

but maybe new for our audience.

So the first story of the week,

this is a tweet from X,

and the tweet is from Citidao,

which is at Citidao.

And the tweet is, citizens,

it's time for an important vote.

Should Citidao return our

remaining funds to citizens?

Vote here on the snapshot.

So for anyone who's not familiar,

Citidao has been around for

at least a couple of years

and got some media coverage

as well when they incorporated in Wyoming,

one of the early DAO LLCs in Wyoming,

and I believe bought land in Wyoming.

At least they always talked

about buying land.

I think they bought the land.

And now they're running into

something that I think a

lot of organizations run

into at some point over their life cycle,

which is that they're

thinking about shutting down.

And in shutting down,

returning whatever funds

they have in the treasury.

I'm not sure what would

happen with the real estate.

but returning the funds they

have in the treasury to

citizens so I've been part

of some interesting

conversations recently

where for example I met

someone who actually rage

quit from city doubt

earlier on in their

development and when I say

rage quit it's not because

they had built a rage quit

functionality into their

dow smart contracts which

is something some dows do

do but the founder said

okay you know what if you

want out it's okay I'll

give you your share

or whatever you had

purchased your NFT for and

you can get out.

But now today, from what I hear,

there has been no rage quitting allowed.

And so that's part of the

interesting discussion now is, well,

is the only option for them

to completely shut down and

return the funds to everyone?

Or should there have been a

rage quit function along the way?

And if there was one,

maybe they'd still have

some passionate members and

some people who would have left.

So either way,

it's going to be interesting

to see what happens here in

terms of whether they kind

of wind up here and return

funds to their citizens,

as they call them.

Yeah,

my initial reaction is there's a lot of

DAOs,

there's a lot of organizations that

launch very rapidly,

especially during the bull market.

And not all of them had what

I describe as like life cycle plans,

like what happens in the

event that we lose steam,

we run out of funding,

or we just don't have

enough interest or whatever

our mission is no longer

feasible is that you have to

have like some type of

authority some type of

mandate from your

participants like are we

going to do this other

thing or are we going to

wind down and if you don't

have that system baked in

from the onset of how you

even make that decision

there's always going to be

disagreements right and so

if some people were saying

I'm surely saying oh like I

don't want to wind down I

keep I want to still do

this um if you don't have

that mandate from the onset

to wind down you're you're

caught in a lose-lose

situation um generally

speaking especially in like

a circumstance like this uh

I just encourage

organizations to try to

make good ethical decisions,

which it seems as though

they're certainly doing, right?

Which is, okay,

if we don't have maybe the

ability to continue

building this organization,

the right thing here is to return assets,

distribute back to people,

contribute pro rata basis,

but definitely best of luck

to them on that.

Not easy.

Yeah, totally.

Yep.

What do you think about Rage

Quit as a feature for DAOs?

Is that something that most

DAOs should have?

Is it just a design decision

that maybe a select few

will choose to implement?

I think it is a good

mechanism for some organizations.

It's not going to be right for everybody.

For those who aren't

familiar with Rage Quit,

it basically allows a member,

a participant in an organization,

to take their portion of

the treasury and say, hey,

I'm going to leave.

The group's going to make a

decision that I don't really like,

so I'm going to take my portion,

the fair portion of it,

and leave and choose to not

participate anymore.

Now,

this is problematic for some

organizations if it really

is you need everything or nothing.

Like if you only have half

the assets and half the people leave,

what you're doing might no

longer be feasible.

And also...

It doesn't it doesn't align

incentives or allow an

organization to have like really,

really long term commitment

to things as well.

So there's good

circumstances and bad circumstances.

I think there needs to be

more ways for organizations

to return money and to wind down as well.

I mean,

it's something that we faced at

Constitution Day.

Yep.

Good point.

Yeah, it's interesting too.

When I think about

traditional organizations,

not digital ones,

let's say public companies,

there would have been no

practical mechanism to do

something like a rage quit function.

The infrastructure doesn't

exist for a big public

company to allow a shareholder to say,

I'm going to rage quit with 0.0001% of

The company's assets, which, by the way,

are tied up in five or 10

different bonds and maybe a

bunch of stocks and maybe a

lot of some physical assets.

Now that with digital

organizations having a lot

of their assets on chain,

at least much of the time,

and this idea that so much

of what's on chain is

liquid or at least is tradable.

Now it's an option.

that organizations can

consider for the first time.

So it'll be interesting to

see how that's used

effectively where it is used.

Definitely.

Yep.

All right.

Turning to the second story of the week.

So we have one more post

from X. This one is from Dan Robinson,

and he is a lawyer and

coder and researcher at Paradigm.

And his post is...

It's disappointing to see a

large VC try to bully the

token governance process

and delay community

proposals at the last

minute in order to advance

their own pet projects.

Now,

this is a tweet quoting a post from

Uniswap Foundation.

Uniswap Foundation announced,

this was about 10 days ago now,

that a proposal that they

were planning on taking to the DAO

actually, we're changing our minds.

We're not ready to let the

community make the decision.

We're just going to go a

certain direction.

And this had the effect of

rubbing some people the wrong way.

And, you know,

I talk about this a lot

because we see this a lot

these days with DAOs.

But, you know,

anytime there's a foundation involved,

I think people need to see

that as a at least a yellow flag,

if not a red flag,

and understand what it

means to have a foundation

or a board of any kind

involved in your DAO.

If there's a board,

you should think seriously

about what power that board has.

And do they have the power to decide?

what proposals are allowed to be proposed.

And even if a proposal passes,

is it going to get implemented?

And so I think, you know,

obviously that's why I do

the work that I do with the DAO LLCs,

which I think are often a better fit.

But I think the important

thing is just to know,

like if you're dealing with a foundation,

you might call it a DAO,

you might not call it a DAO,

but that board of the

foundation gets to decide

what to do with that organization.

And so it shouldn't be,

it might still be upsetting,

but it shouldn't be a

surprise when you find out, for example,

that foundation is in bed

with the VC of the organ

that funded the project.

Yeah.

The back context here is

there's a handful of VCs,

namely Andreessen Horowitz,

that have very large token

stakes in Uniswap.

And they have their own sets of interests,

their own incentives,

their own types of interest agendas.

At the end of the day,

that's also representative

of a DAO and any organization broadly,

though,

is you have lots of stakeholders

and lots of different interests.

So I'll actually take a

counterpoint here as well, which is,

this is one of the

stakeholders that happens

to have a large amount of

voting power representing

their interests.

Part of this is public,

part of this is private,

but this is the type of

politicking and pushing

that happens in DAOs.

And if you want the

organization to function differently,

you need to change the smart

contracts the parameters is

to wish you know how the

organizations are the

decisions are getting done

right um I view this as

being kind of a natural

inevitable part of the

process if someone else

wants to submit the exact

same proposal they can do

that without the foundation

right so another another

you know set of individuals

could propose that same

thing tomorrow they don't

need the foundation's uh

approval to do that uh so I

i see both sides of this one for sure

Yeah, well,

that's great if they don't need

the foundation.

Maybe people are just

becoming too reliant on

some of these centralized parties.

I'll actually go right into

one of the other stories of

the week because it's related,

and then we'll discuss a little bit more.

So this one is from the Dow Times,

and the headline is,

the sandboxes Dow launch

raises concerns over

centralized control and weighted voting.

So this is the sandbox,

which is the metaverse,

a project that was received

a lot of attention,

at least also a couple of

years ago during the last bull run,

when these little plots of

land in the world of the sandbox

became very valuable and you

had lots of big companies, Tesla, Gucci,

Nike,

companies like that buying land with

the hope of getting some

good central real estate in

this new world.

And just recently,

so also at the end of May,

they announced the launch of their doubt.

And in the launch of their DAO,

which you can read more about on Medium,

it's called the Sandbox DAO

Vote on the Future of the Metaverse,

which is the official press

release post from the

Sandbox about the launch of their DAO.

They do talk about, for example,

having these special

councils as a council and a

group of advisors,

and that the council has

the power to veto the DAO's decisions,

among other things.

And so I also don't think

there's necessarily

anything wrong with this.

Look, I think every project,

every initiative,

every ecosystem has its own origin story.

It has its own group of participants.

investors, contributors, users, et cetera.

It has its own culture and values.

It has its own plan and strategy.

And if part of that plan is

to do some things in a more

quote unquote centralized way,

I don't think there's

anything wrong with that.

And whether that's through a

foundation or whether

that's through a council.

And I think in this case,

there is also a foundation again,

and maybe the council will

be the board of the foundation.

I'm not sure.

I just think it's important

for people to know what

they're getting into.

And I guess in the case of

something like this,

maybe if you got into the

land two years ago,

you might have assumed some

kind of fully democratic

decision making process in your future.

But I think that would have

just been an assumption.

And every project is

different and has to decide

for itself how

decentralized it wants to

be in the organizational regard.

how distributed it wants its power to be.

And if there's a couple of powerful VCs,

there's a couple of powerful VCs.

I don't think that's something that we can,

from an outside perspective, just say, no,

we don't ever want VCs or

we don't ever want a council.

At the same time, again,

I just think it's important

for people to know what

they're getting into.

this is a classic example of

an organization that made a

lot of promises and among

them conversations

discussions about

decentralization it means a

lot of things to a lot of

people and ultimately when

you try to uh you know play

this out organizations take

a long time to mature and

getting to the point of

decentralization is a very

hard thing that requires I

think a very gradual process

And I think people see

different time scales.

And so some users wanted

this instantaneously.

Some users are like, hey,

I understand this is a work in progress.

We're going to get there eventually.

But there's certain

decisions that we need to

delegate to the founding

team and the operating team

because they see the day to day.

They know what's happening

on the nitty gritty nuances.

Does it make sense for a

bunch of random people who

don't know what's happening

day to day to make a bulk

of the decisions?

This is the dirty grit of

governance and of voting

and of all the stuff that

we're building and

designing mechanisms around.

But the biggest discrepancy

here is the difference, I think,

between what's promised.

Our industry does tend to

overpromise and then the

delivery of that

decentralization or that

governance mechanism.

Yeah, that's a good point.

I think too, to your point,

it seems like it's becoming

almost a generally accepted

principle that you can't

start out to decentralize,

that you need to start out

with a bit more central control,

a bit more hierarchy,

a bit more coordination to

be successful at the early stages,

that you can't just like

quickly,

haphazardly give control over a

protocol or a project to the community.

And people are talking about

progressive

decentralization and that kind of thing.

Is that always true?

I mean, from your perspective,

is it always bad to

decentralize too soon or upfront?

Or are there some scenarios

where you actually can start out with

I mean,

what about like ConstitutionDAO

comes to mind, right?

You guys went, I don't know,

was it tens of thousands or

hundreds of thousands of

members in like two or three days?

And so did that cause any

problems or where did that

leave you on this issue?

Yeah.

So there's a lot of different use cases,

right?

Something like Bitcoin

that's designed to be

immutable from the onset.

Great, let's start decentralized.

And the sooner you can decentralize,

the better.

Like there's nothing to govern.

There's no decisions to be made.

Constitution Dao was a great

example of something where

the contributions, the donations,

could and should be broad-based.

The participants could and

should be broad-based.

But then when you start

getting to that nitty-gritty detail,

right, if we won the auction,

who's the person who

actually shows up and

receives the document?

Who's in charge of

delivering it to the museum?

Who's in charge of finding

the group that needs to do

some of the maintenance and

restoration of documents,

the preservation work, right?

These things don't need to

be gigantic group votes.

And so this is where you

have to make a separation

between what are operating

responsibilities that are

likely delegated and what

are governing decisions, right?

In our case,

a governing decision might

have been something like, hey,

here's three proposals for

where to put this document.

Which one do you want?

And then allowing the community to govern.

The operations should

probably be delegated.

Interesting.

Yeah.

So to answer your question,

it depends on the organization.

If there's no operations to be done,

if Bitcoin has no work that

has to be done by a central group,

let it be decentralized.

I also think there's a

misconception that things

need to go small, messy,

and decentralized to like, wow,

this is clean and

decentralized and we all

like how this goes.

You can also start off

you know, centralized, structured,

and then, you know,

let out powers as you go.

I think the biggest conflict

of interest you run into is

that is that group going to

continue to execute against

the plan that they promised?

And then how do you assure that?

Yeah, I mean, I feel like it's,

in some ways, a risk either way, right?

Either the community is

taking the risk that

they're trusting the

central team to continue

operating as they promised,

or if the central team is

giving power to the community,

they're taking the risk

that the community might

decide to go in a different direction.

It seems like maybe neither

is necessarily better, just different,

it's just a different risk.

Yeah, but Talc has this...

really great blog post where

he talks about concave

decisions and convex decisions.

And what this boils down to

is there's some types of

decisions that groups,

large democratic bodies

might be very good at doing.

So, for example,

markets pricing things are

actually quite relatively

efficient at finding a good

market clearing price.

versus there might be some

decisions that need to be binary.

Do we do with this?

Do we go with option A or option B?

And this might be something

that's required for legal expertise,

for example, right?

If an organization needs to

have a legal structure,

do you want to vote on that?

Or do you want to say, all right,

this is a really smart lawyer.

We're going to pick him and

her and let her make a

decision for what might be

right for the organization.

So you've got these

different types of

decisions and that's where

I think stuff starts breaking down.

Yeah, it's interesting.

I almost feel like even at

times over the past few

years in my time as a DAO professional,

I've at times

conceptualized DAOs as

really just being for the

governance layer.

And then maybe everything

else should be done the

same way it's always been done.

So maybe, again,

instead of a shareholders and a board,

maybe you have the DAO.

And the DAO maybe should elect a CEO,

maybe should elect a whole

management team and go from there.

But I feel like a lot of

what people are working on

in the DAO industry is

actually ways of doing the work

in a more decentralized way in DAOs.

And not just saying it's

just for the governance layer,

but it's for everything.

We want to be open to new

people joining anytime and

letting anyone in the world

contribute to strategy, planning,

the actual work that gets done.

I wonder

I wonder where the DAO really is.

Is it really just meant for

the governance layer or is

it going to change

everything about the way we

operate organizations?

I've actually stopped using

the word DAO by default.

The main reason being is I think DAO,

decentralized autonomous organization,

is a specific model of a

broader category.

That broader category is

on-chain organizations.

I think we're going to see a

massive amount of

organizational diversity,

organizational approaches,

governance approaches,

governance structures,

management structures,

operating structures.

All these things are very different.

Protocol DAOs are just one

very specific vertical.

And I think a DAO is a good

model for managing a

protocol that every once in

a while needs to decide,

should we upgrade?

Should we turn on a fee switch?

That same model might not be

applicable to lots of other things.

And that's a very important

core tenet of mine.

I think it's easy for the

crypto industry to get into

this echo chamber groupthink.

Everyone starts

regurgitating the same ideas of, oh,

it has to be flat,

it has to be decentralized.

Not everything, right?

Not every organization needs to be.

Some could, some do.

And I do think that generally speaking,

the ethos of Web3 and the

ethos of decentralization

is creeping into organizations of, okay,

well,

how do we allow a wider group of

stakeholders to actually have input?

Or how should we be getting

input from our customers

into decision-making?

How do we get input from our

employees and teammates

into decision-making?

So it's, I think,

that ethos creep that's

equally important.

Yeah, it's a good point.

I mean,

even if I think about like big

Fortune 500 companies that

are looking at how do we

use NFTs and maybe DAOs to

engage our customer base

better by giving them some

control over something.

And yeah, it's interesting.

You know,

I'm so attached to the word DAO because,

well, if nothing else,

it's in the name of my

podcast and my company.

Yeah.

So I might have to stick

with it for a while.

But I can see the philosophical,

what's interesting

philosophically about really looking at,

hey,

are these really DAOs or is digital

organizations really the

core innovation here?

So I think it's a worthwhile

conversation to have.

Yeah.

Let's,

let's turn to the next story of the week.

This one is from the Dow times as well.

And the headline is Dow

acceleration is a movement

aims to advance

decentralized organizations.

So this article is about a

group called DAO Accelerationism,

or DAOAC, or actually DAO-G for DAO OGs.

And it's a group of people

that has organized a series

of events and content over

the past couple of years,

somewhat loosely,

it's kind of different groups of people.

There's been DAOcember, DAOspring,

there's the DAO Handbook,

and uh and I think they're

also connected to the group

that does uh metafest which

is a big dao event that's

coming back for the third

year after after a year off

um and uh so this group is

kind of coalescing around a

new name they're going to

do a token launch there's a

dow g token and probably an

nft sale and then use the

proceeds from all these

sales to help drive

further progress across this

kind of decentralized or

headless brand that has

these various events.

So I bring this up just to let people know,

if anything, you know,

maybe go follow Dowspring

on X. It's actually the

handle is Dowsember and the

name changes from Dowspring to Dowsember.

depending on the time of year.

But there's lots of great DAO content.

And for any DAO OGs that

want to get involved with

helping out with a project like that,

it is also a DAO that's

going to be doing all this stuff.

So I recommend checking it out.

I don't know if there's much

to say on this one, Graham,

but anything you want to add?

They've got an awesome handbook,

a lot of great information,

a lot of great resources.

If you're new to DAOs,

it's a great place to start reading.

Awesome.

Love it.

All right.

Next story of the week.

This one is from the Block Tribune.

And the headline is

plaintiff argues Lido DAO

is subject to securities

laws as an unincorporated partnership.

All right.

So here we have a court case.

It's maybe the third high

profile court case that I'm

aware of in the United

States related to DAOs,

where in the past there's

been different things that

have gone wrong.

with the DAO or allegedly gone wrong.

But in all three cases,

there's this similar

pattern where what's being

accused is that the DAO is

an unincorporated partnership.

And therefore,

all of the people involved in the DAO,

all the token holders

should be held personally

liable for whatever allegedly went wrong.

which in this case is securities laws.

So someone who bought the Lido token,

the LDO token, and only 132 of them,

I'm not sure what they're worth,

but I'm assuming not a ton,

lost some money, maybe 50 bucks,

I'm guessing.

Maybe the tokens are worth more.

And now he's suing the entire DAO company

which sold $3 billion worth

of these tokens.

I think what's interesting

to me about these cases,

because it aligns with the

business that I'm in,

is I'll just read from the article,

the defendants claim

LidoDAO cannot be sued as

it is a non-judicial entity

without legal personhood.

and unfortunately what

lawyers every lawyer I know

in crypto and our company

and me what we've been

telling people for the past

few years is that you don't

unfortunately no one is

above the law we would love

to be but you just you just

can't I mean look if you

want to be like a

censorship resistant tao

that's trying to be

revolutionary or subversive

like yet maybe there are

ways of using dao technology to do that

But that's not what Lido is, right?

Lido is this massive project,

massive ecosystem providing

a really valuable service.

And frankly, for that group to say, oh,

sorry, we don't really exist.

It's just not going to fly in the courts.

And actually,

I think the case law is very

clear that if you don't

select a jurisdiction,

if you don't select a legal entity,

that actually just makes it

easier for any court anywhere,

including in California,

which I think is where this is happening,

which is probably the worst

place to end up in court as

a project or a crypto

company can just say, oh, well,

you didn't choose the

jurisdiction and you have

at least one person in

California and you didn't

choose a legal entity.

So we're going to call you a

general partnership.

And so unfortunately here,

and now I wouldn't be

surprised if this is not the whole story.

Maybe there's some nuance here.

I think Lido must have some

legal entities involved,

but maybe it never wrapped

the DAO per se.

Maybe it said, hey, we have a foundation,

we have a lab co,

but the DAO is this

non-judicial entity and you

can't hold them responsible for anything.

And unfortunately,

I think that part at least

is not going to fly.

I think that this brings up

the proper difference

between what's the legal

definition of decentralization.

A lot of people,

a lot of organizations

operate under what I

described as the guise of

decentralization theater.

Oh yeah, we're decentralized.

Yeah, we're down.

No, there's no one involved.

It's totally flat, whatever.

And effectively, actually decentralized,

right?

You can't sue Bitcoin, right?

Go try to place a lawsuit on

creators of Bitcoin or the

creators of Ethereum or Ethereum holders.

At this point,

they're now actually decentralized.

There is no entity.

There is no group to go to.

You couldn't make a good

argument that even Ethereum

Foundation is running Ethereum.

Not at all.

So far from it.

And I think the thing is,

if you do have people involved,

you need to have an entity

that limits your liability.

It's good and it's fine.

Of course,

there needs to be people

involved in some of these things,

but just don't leave

yourself exposed from a legal standpoint.

Listen to your lawyers, do the basics.

Yep, totally.

So that'll be really

interesting to follow both

from the securities laws

perspective and this issue

of DAOs and legal entities.

The next story of the week.

This one is from Coindesk.

And the headline is Crypto

Governance Advisory Metalex

Raises $2.75 Million.

Gabriel Shapiro Wants to

Borgify Crypto Governance.

A couple of bullet points here.

Prominent crypto lawyer

Gabriel Shapiro's Metalex

raised $2.75 million at a

$27.5 million valuation.

The project is building new

governance standards for

crypto groups to use when decentralizing.

So for anyone who doesn't know,

this concept that Gabriel

Shapiro has been promoting

called the BORG.

has been flying around for

maybe six to 12 months now.

And really the idea is just to,

it's kind of a legal concept,

which is to say, look, a lot of DAOs,

really a lot of crypto

ecosystems should not just

pick one entity.

They should think about

being what he describes as a Borg,

which is many different

entities that are all connected.

And so maybe your DAO has

five councils or committees.

Maybe each of those should

have a legal entity that's

fit for purpose.

And then maybe the head of

the DAO has a legal entity.

Maybe it doesn't.

So I believe they're

building both legal

framework and some software

around this concept.

And Graham,

this should be good news for

both of us as founders in a

similar space that fellow

founders getting some good funding.

and excited to see what what

they do with with the borg

plus it's a cool name um so

any thoughts on this one

graham yeah it's a

directionally great for the

industry I think what the

the broader gist that that

gabe is getting at with

what he's building is there

needs to be greater

organizational diversity.

There needs to be more types

of approaches towards how

we build and structure and

manage these entities.

That's a good thing.

I'm never going to look down

on new ways of trying to do these things.

And Gabe's a smart guy.

He's well connected in the industry.

And I think it's going to be

a really interesting set of efforts.

A lot of what he's working

on that the article might

not have mentioned is this

kind of intersection

between the legal and the

smart contract side of things.

And there's this, I mean,

interesting intersection.

A lot of it gets gray in a legal sense,

but there's also interesting, you know,

philosophical questions

that you have to ask and something that,

you know,

Gabe finds himself at the center

of many debates and questions on is,

you know, is code law?

Is it not law?

Where,

where are those lines actually drawn?

And, and,

there needs to be more

experimentation with how

can you push jurisdictions

and areas to recognize the

code that is written or the

code that is agreed upon as

being the final say as

opposed to having some type

of other social contract a

law agreement an off-chain

agreement that might

actually supersede that so

another form of

experimentation I'm

certainly excited about it

um and I think good things

ahead yep that's awesome

yeah so is code law

I don't think so.

No.

So, so in my mind, in my mind,

law is a social contract, right?

Constitution actually, right?

Great example, right?

It's the most important

social contract in America

and all of their laws come

as a result of that.

The laws that Congress

passes are only able to be

passed because the

constitution gives power to Congress.

The powers that,

or the laws that states and

municipalities pass only

have powers because

The Constitution gives them powers.

All these things are just

social agreements, right?

The Constitution has power

because I live in a society

and agree that we're all

going to follow the rules of that order.

Smart contracts are

different because they can

actually mechanically enforce something,

regardless of whatever a

social contract somewhere says.

If we both put money into an

escrow account and

programmatically under a

certain condition,

you get the money or

programmatically I get the money,

it doesn't matter what a

social contract says,

what I think should happen,

what you think should happen.

The code is going to get

executed exactly as it's written.

and the more that we can

align our expectations our

social expectations with

that mechanical enforcement

the better it's going to be

for you and me and for

society because then we

don't have disagreements we

have less discrepancies the

more we can align those

things the better but the

two are currently not the

same yeah and I think you

know one way of looking at

it too is that in some ways

these smart contracts this code

There is automating part of contracts,

but no one would have even

said that contracts are law, right?

Contracts are made between

people within a legal framework,

a social contract, et cetera.

And contracts have to be

legal to be enforced.

I guess that's where the difference is,

right?

If you write a regular

contract that's illegal,

someone will try to reverse it.

If you write a smart contract,

that's illegal.

I guess still people may try

to reverse it.

So it's clearly smart

contracts live within the

legal world and the legal system,

just like regular contracts do.

So I think it's risky to

think that code is a law,

even though it's connected.

Yeah.

Regardless of what happens on-chain,

We still live in a society

with options and

consequences and real

people and laws that will follow you.

And with real guns aren't aren't the same.

Yeah.

Real, real guns.

The state at the end of the

day has a monopoly on violence.

Yep.

Yep, exactly.

All right.

The last news story of the week.

This is from DL News.

And the headline is.

Why Arbitrum might shower

crypto games with $200 million.

Arbitrum DAO is voting on a

proposal to create a $200

million gaming catalyst program.

Critics have expressed

concern that is too high a sum.

Crypto-based video games

have fallen out of favor with investors.

So interesting here.

I think I was a little bit

surprised to see the bullet point.

Crypto-based video games

have fallen out of favor

with investors because I

think over the past couple of years,

they've raised a ton of money.

And maybe that has slowed

down in the past six to 12 months,

as funding has for most things.

But my impression was that a

lot of crypto games are

under development right now

that are well-funded.

But it's just kind of a fun story.

You know, I think...

On one hand,

there may not be anything

inherently wrong with

giving a ton of money to

help develop crypto games.

I'm personally really

excited about what crypto

gaming might bring.

On the other hand, I think, you know,

when you give a group of

people democratic control over money,

of course,

they're going to choose to do

fun things with it, too.

And maybe that could be a

criticism of DAOs.

But I think...

You know, in some ways,

this may be an example of

how we end up with a more

fun world when you give

power to the people.

Because what are the people like?

The people like video games

are going to fund the

development of video games.

That's great.

Any thoughts on this one, Graham?

Yeah,

I believe the last update is that

they did end up approving this vote.

The main point of contention,

the main point of controversy here is,

uh is actually the way in

which uh proposals are

brought voted upon and

agreed there's a phase

where there was essentially

like a soft vote right to

introduce the community and

people say hey do we want

to have funding for this

effort around video games

huge overwhelming portion

of the dow says yep sounds

good and then the formal

on-chain proposal that

actually allocates the

capital came in with

substantially more money

than what was originally being requested

And everyone's like, yep, sounds good,

sounds good.

And then there was a handful

of people who were saying, wait a second,

even if we like gaming,

even if the thrust of this

is correct and we want to support this,

this isn't exactly what we discussed.

And so we have to have a

broader discussion about

how are we actually making decisions?

And this vote was actually

going on for a substantial

period of time before just

like a sole person like found this.

And I don't know for sure,

but I'm pretty sure credit

goes to a person who goes

by the pseudonym Paper Imperium.

They're involved in many

governance forums and does

a good job of just tracking,

are we doing good governance here?

And in a different world,

this could be something

where no one realized and went,

oh my gosh,

we wouldn't have approved it

if it was this much money.

So this is, I think,

it's the heart of what is

your governance system?

What is your process?

Who's involved in the

decision-making process?

Do you actually have good oversight?

Are people even looking at

the numbers on these things?

It's crazy.

I mean,

this isn't a small amount of money.

This is hundreds of millions of dollars.

It's insane.

It's awesome.

Yeah.

I mean,

it goes back to me to the point of

just every organization can

do its governance differently.

But it's important to know

what system you're living

in or working in so that

it's not as much of a

surprise when something at least that,

you know, when something happens,

is this the way things are

supposed to go or is there

actually something wrong here?

Yeah.

Totally.

Yeah, that's interesting.

So you're saying the

on-chain vote actually did end up passing,

or at least the off-chain version passed?

They did end up approving

the allocation of capital.

Yep.

Cool.

Awesome.

Exciting.

All right, good.

Because I tried out,

there was this crypto game

that came out last month

that had been very hotly anticipated,

and then I thought it was really boring.

Battle of Guardians, something like that.

So anyways, unfortunate.

Better things to come.

My take on video games is like,

for a second, pause anything blockchain,

pause anything crypto.

Is it a good game?

Is it a really good game

that gets people coming back again?

If that answer to that is yes,

now let's talk.

On what system is it built?

Does it happen to be on crypto?

That needs to be the secondary question,

not the first question.

I don't think that something

being built on crypto is

ever going to attract a large,

sustainable audience who's

got staying power.

The thing that brings staying power is

good games and broadly in

the crypto space good

applications and just being

on chain enough isn't

enough yep yeah good point

yeah I agree I mean to me

it's like and as you know

I'm the type who I love the

idea of video games and I

follow a little bit of

what's happening in that

world every now and then a

game captures my attention

and every now and then like

every few or several years

a game captures my

attention enough that I'll

put like a few hundred

dollars into whatever they're

their system is.

And in those cases,

I think I would spend so

much more if I actually

owned the stuff I was

buying and if I could

resell it in the future.

I mean, I would just, you know,

whereas before my limit

might be like 50 to 100

bucks if I like the game,

maybe like a few hundred

bucks if I really, really love it.

Yeah, my limit, I think,

would go up if I'm actually

buying stuff I can own and

trade and sell.

But to your point,

to even get me to put $300

into a black box that I

probably will never see again,

it's got to be a good game

in the first place.

Definitely.

It needs to be a good game.

I think that some projects

have accidentally shot

themselves in the foot.

And the reason I say that is

what we really need is a

really set of really high

quality AAA games.

And there's going to be a

group that nails the mechanics,

that nails gameplay,

that nails experience.

It's going to be great.

And it's also going to

happen via blockchain.

It's going to have a lot of

these properties that we

know to be important.

The problem if you raise a

bunch of money by selling NFTs,

selling tokens,

you've got all this money in the treasury,

the operating team has this money.

The incentives are a little bit backwards,

right?

You've got all the money now up front.

Now you have to go do the

hard work of building the thing.

It's actually, I think, a feature,

not a bug.

Most of the time when groups

don't have liquidity,

like if you're a startup,

a startup who's building video games,

completely off chain,

you go raise money from a VC.

It's illiquid.

You can't sell out.

You can't make money from this yet.

You don't have any choice

but to go build an incredible game.

get it in a bunch of hands of people,

have it be wildly successful,

and then maybe your game

will get acquired.

Maybe you can go public.

So you have all these

options for exits later.

But if the exit happens

before you build the product,

there's a lot of people who are like,

you know what?

The game might come out eventually.

And we've seen this cycle

happen again and again.

And it is a truly broken

incentive in many cases.

So this is a case where a

lack of liquidity on the

relationship to your

investment might actually be a feature.

Yeah.

Yeah, that's interesting.

So that could apply really

generally to any time we're

leveraging crypto to bring

liquidity to any project or

startup at the earliest stages, right?

Because if you get enough-

Go ahead.

Just thinking like if you

get enough hype and your

marketing team's good and

you haven't even built anything yet,

but you raise millions of

dollars and you actually

could walk away with that money, right?

Start selling your tokens or

borrowing against your tokens.

Yeah, I mean,

I think I'm sure a lot of

people fall into that trap, right?

It's like, oh,

I have now I already have a

million dollars.

Why do I even need to go build this game,

right?

And then maybe you just walk away.

You need people to be hungry.

You need them to be incentivized.

I'll be the first to say,

I guarantee you in this

cohort of AI tokens,

there's tons and tons of

them that don't end up building jack shit,

nothing.

And there's a lot of people

who make a lot of money.

And that should make you mad,

makes me mad.

It will make a lot of people

in the industry mad.

But it's because you're

putting money into a bad

incentive mechanism that's

not destined for success.

Yep, yep.

All right, with that,

let's conclude the JustDAOit news report.

So that was the first half of the episode.

I will do a quick segue and a quick ad,

and then we will turn to

the featured guest interview with Graham.

So for the ad, it's an ad for MyDAO,

since we're the company

that sponsors the show.

Just reminding everyone that

we're in the business of

providing legal entities

for DAOs and Web3 projects.

And we're happy to talk to

anyone who is interested in

the potential for legal

entities involved in their work.

We also have a partner

network of lawyers and tax

advisors and other professionals,

banks all over the world

that are interested in

working with DAOs and Web3 projects.

So if you are looking for a

lawyer or an advisor, please reach out.

There's no cost to get connected.

Or if you are a lawyer or a

advisor of some kind

interested in working with DAOs,

please reach out as well to

get added to our network.

With that said,

turning to the featured guest interview.

So what's fun about this format, Graham,

is we've already gotten to

talk about some really meaningful stuff.

But before we get back into the weeds,

let's just take one step back.

And would you please share

with us what got you into

Web3 and DAOs in the first place?

Great question.

Uh, getting into web three,

it started with crypto

specifically Bitcoin in 2017.

I was, uh,

running a regular web two company.

It was a real estate aggregation platform.

And one of my customers had

already hit it big on Bitcoin.

Um,

we were having just a really great

conversation about it.

And I,

I didn't know much and I was making

the con Bitcoin argument.

I was like, this is bad cash flows.

I don't understand this.

And he made a lot of good

points I just didn't have a

reputation for.

So he recommended a book to me.

It was Digital Gold by Nathaniel Popper.

And I fell down the rabbit hole.

Next thing you know,

I was trying to arbitrage

Litecoin and Bitcoin on random exchanges.

There's a crazy 80% premium

on US to foreign exchanges in 2017 time.

Super illiquid.

There was no money to be

made on some of these things.

But I was like, it's super fascinating.

I kept falling down the crypto rabbit hole,

ended up leading crypto

investing at 28th Street Ventures.

It's a family office.

I was doing private equity software stuff,

also public market software stuff,

but I started the crypto

investment practice and was

going to get deeper into it.

In 2021,

Constitution DAO was just the

craziest whirlwind week of my life.

I really don't even have words for it.

And after that,

I decided to go full-time crypto,

spent some time at Salt's

Crypto Fund and now

building mezzanine for

building tools for on-chain

organizations.

Awesome.

So tell us just a little

more about Constitution DAO.

I mean, how did that happen?

Yeah.

I think like a lot of things,

it's the right mixture of people, events,

and circumstances all at the same time.

The very origin of it's kind of funny.

I was in group chat with a

couple friends from college.

None of them are crypto.

None of them are Web3 or

technology.

One of them works at an

auction house in Ohio and

follows auction house news,

had seen this thing about

this upcoming Sotheby's auction.

There's an original copy of

the Constitution.

She sent this little article to the group.

And I'd been doing research

on DAOs at the time,

on specifically Aaron

Wright and the folks at

Tribute Labs had started a

group called SharkDAO.

It's one of the first

collector DAOs of sorts to

pull together money and to purchase NFTs.

And

And so I had this fresh in

my mind when I got this article.

And there was two things that struck me,

which is the estimated

price of the auction was

going to be way too low.

They were estimating $10 to

$15 million for a copy of

the Constitutional Convention copy,

right?

This is insane.

And I was like, that's nuts.

And also...

fresh off thinking all this, you know,

this doubt that things I was like,

we could definitely launch

a data by the Constitution.

So I messaged my buddy, Austin,

we put together a quick,

like one page plan,

started messaging everyone

we know on crypto Twitter saying,

kickoff call 8pm,

launching a data by the Constitution.

A bunch of folks showed up

immediately after kicked off the Twitter,

the discord.

By that point,

we'd already reached out to Sotheby's,

we had three different

plans and process in

parallel to start legal

entities to be able to

actually participate in the auction.

So all the parts that

started did moving right away.

And then that whole thing

was exactly one week.

We started on November 11th

was the day we hosted that kickoff call.

November 18th, one week later,

our core team was in New York City,

a couple blocks away on the

phone with David Schrader.

And Brooke was the famous

person across from us

bidding on behalf of Ken Griffin.

That's awesome.

That's cool.

So you know what I didn't

realize until now was that

we passed our first law in

the Marshall Islands in November of 2021.

Is that when you're talking about too?

Yeah, that's it.

Yeah, around the same time.

That's cool.

Well, really exciting story.

Again,

I definitely recommend people check

out the Constitution Dow story online.

Although before people go do that,

are there things they get

wrong in the media?

Like if people just go Google this,

is there anything you'd

want them to know that was

like different or-

So actually there's all kinds of, um, part,

I, it's almost never malicious.

It's just people don't have, you know,

complete stories, complete facts.

And part of it is we,

we did try to keep it

fairly decentralized.

And so it means you don't

have as much of like a

clear narrative of exactly what happened.

Um, one of the things that gets, um,

wrong frequently or people

are just confused about is, well,

what happened with the money, right?

We raised tens of millions

of dollars worth of Ethereum.

We lose the auction.

What happens next?

Um,

This was very straightforward.

The mechanism design that we

used was if you put in one ether,

you got 1 million tokens

and you would have pro rata,

proportional governance of

the document if we'd won it.

If we didn't win,

all the money went back

into the smart contract.

There's no fees, there's no cut,

there's no pre-mine, there's nothing.

And you can take your

million tokens and redeem

them for your underlying assets.

You could get back 100% of your refund.

Of course, you still pay gas fees.

There's nothing we can do about that.

That's just a part of transaction costs.

But you can get your refund.

What we did not expect,

what we did not know,

what we did not predict was

that when we said, all right,

we're winding down the

organization because we lost the auction.

Take your money back and go home.

It's the right thing.

It's the ethical thing to do.

People said no.

I don't want, I don't want my money back.

I want my token.

And they started,

they started speculating on

this token on secondary markets.

This thing is, I mean, to this day,

right now,

hundreds of millions of dollars

in market cap,

doing hundreds of millions

of dollars daily volume for

the purpose of memes.

Like, right.

There's,

there's no rational explanation

other than, you know, people want it.

There is locked underlying assets.

If you were to go buy people tokens today,

you could go buy them on

the market and go redeem

them for the underlying

collateral at the same

original exchange rate.

There's no game theory to

consent is because

secondary market price just

so much higher than the

value people put into it.

So that's kind of the funny

circumstance about how we

got to where we're at today.

Yeah,

and I think that's going to be one of

the most interesting things

to watch as crypto develops

and hopefully goes more

mainstream over time is

just how much power is

there in this market

capitalization mechanism

that you introduce anytime

something can be traded

freely or publicly,

but I don't mean through the SEC,

but through...

you know,

just crypto markets that are

practically free and anyone

can take advantage of them.

And so like, what's the power of a meme?

I think maybe that's the question, right?

As people are just more and

more online and put more

weight on the digital world.

And as people are wealthier and wealthier,

I mean, the wealthier people get,

the more they have a few

hundred bucks or a few thousand bucks,

to spend for fun on something.

And if that fun thing is a token, well,

now you have a market cap of,

like you said,

maybe hundreds of millions of dollars.

And what does that do to the

economy at large if we

suddenly have piles of

capital being generated all over?

Really,

this should be a great thing for

capitalism.

You can capitalize something

that previously was just in our heads,

right?

Yeah.

Yeah, really interesting.

I don't know exactly how

it's going to pan out,

but there is something that

crypto has done that's the

best representation of,

which is things that

capture a lot of mindshare,

things that people think about a lot,

have some price

potentially value to them as well.

There's the common value investing adage,

I think,

from Buffett or Munger or

something that price is what you pay,

value is what you get.

You can make an argument that price,

Constitution of Dow's token,

is what you buy on the market right now.

The value is what is the underlying asset.

There's an actual knowable

value of Ethereum.

For a lot of these other things,

I think we're going to have

interesting questions, which is,

do people actually care about value?

And increasingly so,

the answer to that question

might not be yes,

that people are

disconnecting from what

traditional measures of value have been,

not for days or weeks or months,

but entire years.

And so it does beg the question,

is there a fundamentally

different paradigm and is

the traditional means of

assessing and measuring

price or value or

predicting that are those

beginning to deteriorate or

they're just certain

sectors that you can't

apply those same rules do

the laws of you know

physics not apply in the

same way and only long

duration of time is going to tell

But there is also like a

different value that people

are presumably getting, right?

Like a emotional value, a spiritual value,

right?

Even if the underlying

Ethereum isn't worth much

compared to the market cap.

And by the way,

I just looked up the token.

I assume you know,

it's almost 10x in the past

like three weeks for some reason.

Yeah.

This is how the crypto industry works.

I didn't plan to make a meme coin,

and it's a meme coin now.

The thing's hit over a

billion dollars of value.

It's nuts.

I hope you still have some.

You don't feel free to not comment on that,

but I hope you still have some.

I think a lot about DGEN.

You know the DGEN token?

which probably has a similar

market cap now,

but this is a token that

was launched about six months ago.

It kind of launched as a meme coin,

but then it became in some

ways the unofficial token

of the Farcaster ecosystem,

which is people who listen

to the show know I talk about a lot is,

this Web3 social network.

And irrespective of all the

cool things people are doing with Degen,

because there's a Degen

Layer 3 blockchain, there's a Degen,

there's all these things

people have built with Degen,

there's all these apps you

have to use Degen on.

But still,

when I look at all that activity,

I'm like, it doesn't seem like much,

but the market cap is

probably similar to the People tokens,

the Constitution DAO tokens,

hundreds of millions of dollars.

And

I don't know.

It's a head scratcher,

literally and figuratively.

It's just really hard to

evaluate whether it should

be worth that much.

Could it be worth 10 times as much?

Should it be worth 100 times less?

It's just so hard to know.

There's not a good framework for it yet.

The best thing I've got for

now is just what is the mind space?

What's the mental share?

People are thinking about it

enormous amount.

People are using it.

People are tipping in it.

And people are constantly referencing it.

It's on people's minds.

And so to them, it has some type of value.

If someone's willing to pay for it,

there's a price.

Yeah.

Interesting.

It reminds me a little bit of celebrity.

Like you have these like,

I want to put like air

quotes around celebrity.

You know,

someone's on like a reality TV

show one time, like literally one time.

And then for the rest of their life,

they can go on talk shows.

They can get speaking arrangements,

you know,

you get paid to show up at a

club and dance, you know, it's, and now,

so you do, you have one, you do one meme.

you're involved in one thing

that gets meme value and

you potentially have a

lifetime of credit for it.

At least as long as there's

a token involved, right?

As long as there's a token

related to your meme and it

gets big enough and you

hold some of the tokens,

maybe it's a lifetime of income even,

you know,

in a way that already exists in

the celebrity industry,

but maybe new to tech and

organizations and, you know,

Yeah.

Entirely.

And some of these

celebrities are very good

at rolling awareness into business.

And then they make a lot of

really good business decisions about it.

I mean,

the Kardashians are probably one of

the most notable example

have earned billions of dollars,

created billions of dollars

for themselves through the,

the original thing was Kim

Kardashian got public,

got publicly a bunch of

public publicity because of a sex tape.

And after that, they had a TV show.

And after that, they had music.

I mean, they had all these brands,

all these companies,

and they've done a good job building it.

But it started as originally

essentially meme, a bunch of publicity.

It's incredible.

All right.

Let's go back to coming out

of Constitution DAO and

leading up to working on mezzanine today,

which I want to talk more about, too.

But I'm curious about your

journey in between.

Actually, not just your journey,

but if you could reflect

for us on the journey of

the DAO industry over the past few years,

if that's fair to ask.

What's your journey been and

what has the journey been

for the industry and for DAOs?

in the few years since constitution doubt.

Yeah.

So there's a couple of

charts that actually I'll send your way.

We can throw into the show

notes so people can access.

Electric Capital puts out

this great developer report every year.

And one of the things they

charted was DAO participation,

DAO activity.

And this was something that

they definitely tracked during 2021,

2022.

I think during 2023,

they might have stopped

doing it because DAO

activity largely started declining.

And they just said,

we're not going to follow this metric.

But it was really funny.

There's literally this inflection point.

in November 2021,

with the measure of DAO

activity is going up steadily,

and there's this kink point,

and it just goes up.

And it was Constitution DAO.

And so we saw this mass

creation of organizations afterwards,

because we got into the

Wall Street Journal, New York Times,

New Yorker,

everyone was talking about

what was going on.

And some people said, wow, DAO is like,

this is cool.

And they started copying and

pasting them all, right?

We had DAOs for purchasing

basketball teams.

We had DAOs for purchasing golf courses.

We had DAOs for purchasing books,

this kind of purchasing thing.

Then people were saying, okay,

we also have DAOs for

schools and DAOs for

biology and DAOs for cancer

research and DAOs for this

mass proliferation of them.

And there was a lot of

copying and pasting of the

existing model rather than saying,

for my particular use case,

how do I take what's

already been demonstrated

to have success and modify

it for my use case?

And so I think we actually saw this really,

really tough period now for

the last two and a half or

so years where people have

been using models that are

somewhat inadequate to

exactly what they need and

what exactly their use case is.

A lot of DAOs have struggled

A lot of DAOs had this initial burst,

pop-up excitement, pop-up energy,

enthusiasm,

building up these large Discord servers.

And then people are like, oh, yeah,

what happened to them?

What's going on anymore?

What happened to the money?

And this is, I think, on account of,

do you have a model that

matches well what you want to do?

And in the last few years, especially...

We've begun to see, like,

there's a handful of DAOs

that have done all things

considered an excellent job, right?

We talked about arbitrage

from DAOs earlier, their DAO earlier.

They might still be making

decisions that I might view

as suboptimal.

Oh, no, we accidentally spent, you know,

tens of millions of dollars

more than we all originally

agreed we were going to

because we didn't double

check what the proposal said, right?

Like, crazy stuff like this.

But at the same time, they're functional.

They're developing and

cultivating a great community.

But I think that what we have to,

as an industry,

kind of be asking ourselves is,

what are those really great examples?

Where have things gone well?

Why did they go well?

And how do we emulate those things?

And I think in many of these cases, right,

it's have we thought a lot

about the design structure?

Do we have the ability to

delegate spending power to

people who can make good,

thoughtful decisions?

This is a question of capital allocation.

I think those are some of

the examples that are interesting.

But everyone's got growing pains.

MakerDAO has had a lot of growing pains,

probably one of the largest,

most successful DAOs out there.

Even NounsDAO also, I mean,

I think in 2022 was by a

lot of measures and votes, like, you know,

one of the most biggest and

interesting DAOs out there.

They literally had a schism,

a literal split into two organizations,

a hard fork.

And now no one knows which

was the original,

which community are you part of?

And there's different types

of disagreements.

So it's growing pains.

I'd categorize the last few

years as growing pains.

And I think going into this next cycle,

we're going to take a lot of those pains,

a lot of those learnings and say,

how do we be more robust?

How do we approach this from more angles?

And I think that's what I'm

excited to see moving forward.

Yeah, yeah.

Yeah, it's awesome.

Yeah,

it reminds me again of just this

concept of like,

is the DAO just the governance layer,

which would be one thing.

But I think what most DAOs

are actually trying to do

is run entire organizations

differently from before, right?

Like if I think about my startup,

the governance layer,

is one of the least,

it's like the least of my concerns.

Now, of course, my investor might say,

well,

I care a lot about the governance layer.

And of course it's important.

But like,

I know who the owners are and

they pretty much have told me just do,

you know, they trust me.

And now I'm the CEO.

Now I go run the company.

And most of what I'm worried about,

I think most of what

they're worried about is not governance.

it's the day-to-day the team

team dynamics the strategy

the plan the execution the

operations you know all the

things we're focused on to

try to build a successful

business are not on the

governance layer um and so

I just have to wonder you

know if you have these

these dows these organizations

that are trying to be successful,

but are focused almost

entirely sometimes on governance,

I feel like that's going to

be a really big challenge for them.

I think vision and purpose

are super essential and

oftentimes lacking in DAOs.

Arbitrum or L2s might have a

very clear vision,

which is we want to be the

L2 or the network 4X.

And

The way to get there is fairly clear.

Grow users, grow adoption,

have useful applications in your network.

A lot of other DAOs,

I think there's been kind

of this nebulous vision

that people actually don't

know what they're getting behind.

They don't know exactly what

they're rallying efforts towards.

One of the reasons I think

Constitution DAO was

successful was it could be

explained in a very simple, basic mean.

We're all going to buy the Constitution.

People are like, all right, I'm in, right?

It's very, very simple, right?

It doesn't have to be necessarily a crazy,

heady thing.

It doesn't have to be a

massive technological undertaking.

But it needs to be very,

very clear for people to be

able to get behind.

And I think that

nebulousness is the doom of

so many organizations.

Yeah.

All right.

So let's,

let's continue following the story.

So that's where DAOs have

been over the past couple of years.

And now you're working on a

project called mezzanine.

And I want to just reflect

for a second on the state of DAO tooling.

And I'm curious, you know, how,

if you would agree and then

where mezzanine fits into, into this, if,

and I know you guys are

looking a little more

broadly or a different lens

from the word DAO,

but I think it's still fair

to say it could be used as a DAO tool.

Yeah.

You know, if you had asked me,

I think like six to 12 months ago,

I probably would have told

you that like last cycle,

DAO tooling was not ready.

It was just too hard to use.

And and then now it's ready.

And so we're going to see

this like giant

proliferation of DAOs and

the tools are going to

support them adequately.

Now that a little more time has gone by,

I would probably say that

DAO tooling is not quite

ready and that we haven't

made as much progress as I expected.

And that therefore,

maybe it's going to be like

one more cycle until like

we're still very much at

the experimentation stage.

And like we've got to figure

out how to make, you know,

not only fund and make more DAO tools,

but tools that are flexible enough to

or fit for purpose,

but have found a really

good product market fit.

And I'm just not sure we have that yet.

I mean,

there were some exciting DAO

tooling projects that got

shut down over the last year.

So I'm curious,

is that indeed the state of

DAO tooling that we have a

lot of progress still to go

before we're ready to take

DAOs mainstream?

And then how are you

participating in that space?

Yeah.

we got a long ways to go.

We got a long ways to go.

If we're making like the internet analogy,

right?

This is like,

late 90s actually there was

a really great uh tweet

from uh toby luke from uh

shopify the other day and

he shopify if you're not

familiar right it's a

e-commerce platform that is

you know was started very

early on he was trying to

sell snowboards online and

realized okay I can help

other people start their

online stores and when he

was going out to to uh

raise money the common thing was

how many people are going to

be selling things online?

How big are these internet

businesses going to be?

How big is e-commerce going to be?

And people are still deeply

skeptical of Amazon.

And certainly like this type

of model where he's

supposed to be helping

other people build these things.

And the criticism he got from people was,

well, there's only like a couple dozen,

maybe a couple,

maybe a couple hundred of

these e-commerce stores.

It just can't be that big of a market.

You're not going to make that much money.

people didn't believe that

business was going online.

And right now,

a lot of people do not

believe that organizations

are coming on chain.

It is inevitable, but it takes a long time,

takes a long adoption cycle,

and there's a lot of

primitives that need to

exist and need to be

adopted in order for them to occur.

Organizations are tough, right?

And especially if you start dealing with,

right,

we talk about the legal issues that

DAOs have had.

If you want to deal with

The SEC, if you want to do a FinCEN,

you need to have identity.

That means we have to have

identity products and

identity primitives.

But we care about privacy,

so we need to have

zero-knowledge identity

that's privacy-preserving, right?

So this takes time to build.

Identity is one category.

Okay,

now we also need to have the actual

logic that facilitates the

movement of money between these things,

right?

That's recreating what has

taken decades to build in

Web2 software and

traditional financial rails.

Now it needs to get

translated over into Web3 rails.

We might have some of the verbs of finance,

lending, borrowing, trading, swapping.

But when you think about the

traditional finance space, it's really,

really big.

And so you've got the investing world,

but then you also have a

whole enterprise SaaS world

that touches everything.

Any part of like a company, nonprofit,

philanthropies, organizational structure,

right?

You got all these tools for

billing and fundraising and

payroll and for, you know,

raising capital,

anything that touches your money.

There's software that got

written as logic and it's

built for old rails.

All that stuff needs to get translated.

So the problem that we face

is when you only have a little bit of it,

right?

And someone says,

I'm going to go launch a DAO.

They go, oh my gosh,

I'm used to having all this

great software for running

my organization.

I've got nothing.

that the lack of software

creates inadequate

organizations that are less

empowered and have worse tools.

And then those organizations,

we saw over the last few years,

sometimes struggle.

And the lack of tooling

means that people go,

I'm not sure if this is

really going to be a thing.

So it is a struggle,

but the arrow of progress

and the direction of

progress is very much inevitable.

And what we have now,

the cycle is much better.

I do think,

this might be unpopular to some people,

a lot of bad tools

dow tooling got funded

during the bull market when

I say bad stuff that's not

sensible teams that were

not good products that were

not sensible and so when

you build when you found a

whole wave of things during

a bull market during uh

this period of uh great excitement

you don't have the idea of

how do I make this really durable?

How do I make this really useful?

How do I make this really sustainable?

And I think that in the last

couple of years,

a lot of interesting things

have started getting built

and we're going to see the fruits of that,

but it takes time.

So what is it that you guys

are doing at Mezzanine?

What's your approach?

What kind of tooling are you building?

So what we're doing is

essentially providing a

marketplace for these types of tools.

By marketplace,

I mean it has a unified

interface and it allows

someone to connect and know

something is safe and say, okay,

we've started an organization,

maybe we've got tokens,

maybe we've got governance.

All that aside, that's the governance,

you've started your organization.

Now you have the question,

what is our organization doing?

And what tools do we need to do that?

So these are the questions

of how does an organization

have to operate day to day?

The billing, the payroll, the fundraising,

the invoicing.

And so what this allows you

to do is it lets your

organization start on blank slate and say,

OK, I'm an event DAO.

We're hosting ETH DC 2025,

and we're going to need to issue tickets.

Let me use this ticketing app.

We're going to need to have

a donation portal.

Let me add a donation portal.

We're going to need to give

people maybe refunds at the end.

Let's add a refund mechanism.

We're going to need to, you know,

so you can start building

your own organization.

We're going to need to

visualize our treasury.

We're going to need a manager's treasury.

Let's add that tool.

That dashboard is going to

look entirely different

than someone else who's running, say,

a developer guild, right?

Me and 40 other developers

start building some great software.

We need to pay each other,

distribute money to ourselves.

We need to invoice our clients,

receive money.

So all these activities are

coming on chain,

but all of them are going

to look different.

But you should be able to

choose between the suite of

tools and services to build

the organization that is

exactly right for you.

Awesome.

So mezzanine is a place

where you plug in as kind

of like your core,

and then you find all the

apps that you need on the

mezzanine marketplace,

whether that's payroll, billing,

invoicing, fundraising, et cetera.

That's correct.

So what does that

environment look like right

now in terms of apps to

plug into the marketplace?

Are you finding that people

have built really good

solutions for a lot of these problems?

Are they all under development?

Do you wonder if you may

have to build some yourself?

It's a mixed bag.

There are some good tools

that have been built.

There's some that are in the works.

And there's some that have

yet to be built and I

imagine are going to be on the way.

The way we imagine this

marketplace is we're not

going to start with the

assumption that anyone's

just going to be sick.

for distribution,

we're going to use you for monetization,

get our product in people's hands.

Let's start by saying,

let's build a basic product

for batch payments, for invoicing,

for these things.

But if we're doing our job

as a marketplace,

any of the individual apps

that we're starting with

and letting users start

with will be supplanted and

replaced by a multitude of

other options that are

narrowly specific for a

particular use case, particular function,

for particular organizational type.

And that's the world that we

all want to live in that says, oh,

I'm a grant counsel.

I need a specific tool for

compensating people in a

nonprofit like way,

or I need a way for distributing grants.

Right.

All these things are very, very specific.

Let's just start with very general tools.

The thing that is hard about

this and something that's

very important to us,

we want to do it with a

unified interface.

So say that when you connect

your safe that represents

your organization,

Right now,

bouncing between a million

different applications,

you've got these problems

of access control,

you've got problems of permissioning,

and just simply differences

of interfaces.

You also have fragmentation

between chains.

So if you solve a lot of that and say,

look, it's a simple interface.

You have to think about chains.

You have to think about networks.

You have to think about

permissioning and access control.

It's done at the base layer.

So any of the tools that are

built here all exist kind

of at that same starting point,

that same initial point.

So the only thing that those

applications have to worry

about is what's the actual logic?

What's the actual interface?

Use our SDK and make yourself available.

Use this to distribute your

product to many,

many on-chain organizations.

So does doing that require

you to create some kind of

standard interfaces around the data?

Like if I assume there might,

you might need to connect

an invoicing with a payroll,

with a financial system

that may all be different

components in the marketplace,

but they may want to be

able to talk to each other.

How do you make it so that

they can talk to each other?

Great question.

The nature of smart

contracts and on-chain data

makes it a lot easier for

these things to interact with each other.

If I were to make the Web2 analogy,

I've got Web2 products that

intentionally build walled

gardens and gated moats

because that's how they

defend their business model.

Web3, I can read that on-chain data.

I can spin up a new

interface for that exact

same smart contract and say,

I don't like your interface anymore.

I'm going to use this other one,

but I get to keep my

contract that I instantiated.

I get to keep my software.

So there's not platform lock-in.

So there's this big,

big difference here about

that underlying structural incentive.

Interesting.

So just because smart... My

initial thinking is anytime

you're building software,

you get to decide what...

effectively API to make

available to the world, right?

Whether you're building a

smart contract and

technically maybe

everything's available to

the world by default,

or you're building a

traditional piece of

software where you are a little more like,

look,

unless you specifically build the API,

no one will be able to touch

that function you want to

make available but still in

both cases you're choosing

you know what functions to

make available from the

software to other software

and I would think that

still has to be done in a

careful and thoughtful way

if it's going to be easy

for other people to

interact with your software

is it just that smart

contracts because by

default they're public

people are forced to build

in a way that makes them interoperable um

So yes and no, right?

So if I build something

that's built off smart contracts,

but the most useful parts

of my application are

actually things that

involve off-chain data and

off-chain information,

that organization probably

still has some type of

traditional web two mode

because that information is locked in.

If you solve that base layer and you say,

look,

the basic building blocks of like

your organization's identity, existence,

access control, permissioning,

and spending is done here,

then you can allow the DAP

to only focus on the logic and rationale.

So all those financials are

still flowing through the same treasury.

All of a sudden,

it becomes theoretically

quite easy to generate instantaneous live,

real-time, up-to-date cash flow statement,

income statement, balance sheet,

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